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Ultra Electronics is our UK Index loser this morning (-7.2%) down sharply in an otherwise quiet yet buoyant market. Whilst there may be an element of negative read across from current chipmaker woes, after revelation of a security oversight that makes a wide range of computers and smartphones vulnerable to hacking, we note limited weakness yesterday as this news was breaking. Might we hear more from the company about this at next week’s trading statement?
That said, the shares had been topping out since Wednesday, following a 25% 6-week rebound. The real driver for this morning’s down move may in fact be last night’s news of a delay to the UK defence review while solutions are sought for a £20bn funding black hole at the MoD, and amid political backlash since the internal appointment of chief tory whip Gavin Williamson as defence secretary.
Technology is key in light of increased cyberwarfare and online threats and will only add to sector players’ uncertainty about future spending. Note peer shares weak, down up to 1.5%, but ULA underperforming markedly. Perhaps due to its links with both defence and aviation, the latter now extremely technology reliant.
Mike van Dulken, Head of Research, 5 Jan 18
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